The broadest measurement of the U.S. economy (GDP) expanded solidly in the third quarter at a 3.55 percent annualized rate. This marks two straight quarters of robust growth. Growth at this rate can accelerate future job creations. Still, we are missing consistency. The first quarter was negative. For the year as a whole in 2014, GDP looks to notch up only around 2 percent growth. That would mark nine straight years of sub-par economic growth of less than the historical average of 3 percent.
Real estate components slowed down in the latest quarter. Residential investment spending (from new home construction to real estate brokerage service) grew by only 1.9 percent, much slower than 9 percent gain in the prior quarter. Commercial real estate investment (known formally as nonresidential investment) expanded by 5.5 percent in the latest quarter, slower than the 10 percent gain in the prior quarter. Difficulties in obtaining construction loans have resulted in slower than normal expansion in the real estate sector.
A big contributor the latest GDP growth came from increased business spending on things like computers and equipment and strong export growth. Given the faster U.S. economic expansion currently versus most other countries, export growth will likely slow in the upcoming quarter while import consumption will pick up.
Without going into too much detail, the upcoming fourth quarter GDP is likely to grow at 2 to 2.5 percent, which is simultaneously good news and bad news. Good that the economy is in no danger of a fresh recession. Bad that economic growth is again slipping back down below 3 percent.
Long periods of slow economic growth have consequences. Roughly speaking, $4,700 is missing from average American’s pocketbook. That is the gap between the potential GDP had the economy grown at the 3 percent historical growth rate versus what actually happened in nine straight years of sub-3 percent growth.
Who to blame for the missing $4,700? That’s easy. Most people decided very early on as to whom to blame, with the reasons to be found and made up later. Democrats will blame the unfettered wheeling and dealing of Wall Street that nearly crashed the whole global financial system in 2008 and the subsequent widening inequality. Republicans will blame too many new regulations, higher taxes, and Obamacare. Many will make their feelings known on November 4th. Though there are some concerns about who votes and how often, it will be nothing like that of the master crook. The Soviet leader Stalin once said what really matters in elections is not about how often one votes, but who counts the votes.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.